Question: Purchasing Synergies Benefi t Offi ceMax and Boise Office Solutions Like the trees it manages, Boise Cascade Corporation has grown and evolved from its roots as a wood products company in Boise, Idaho. Building on its strength as a manufacturer of wood building products and paper, Boise established Boise Office Solutions to provide offi ce supplies and furniture directly to businesses, government offices, and educational institutions. In its 2002 annual report, Boise stated, "Boise Office Solutions' primary goal is profi table growth. This means winning new customers, selling more products to existing customers, and controlling operating costs." Boise took a bold step to achieve that goal through the 2003 acquisition of Offi ceMax, an office products company with nearly 1,000 retail outlets. The acquisition more than doubled sales in Boise's office products distribution business. The company expects to use its combined purchasing power to lower the cost of the offi ce products purchased from other manufacturers and to eliminate duplicate distribution facilities and marketing eff orts. Boise expects the combined companies to achieve synergy benefi ts of $160 million a year.
Critical Thinking
1. How can purchasing more units of an item enable a company to purchase that item at a reduced cost?
2. Can you think of any two other companies that could reduce their operating costs by combining their businesses?